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Tax Blawg

Tax Talk for Tax Pros

Introduction

Welcome to TaxBlawg, a resource for news and analysis of current legal issues facing tax practitioners. Although blawg.com identifies nearly 1,400 active “blawgs,” including 20+ blawgs related to taxation and estate planning, the needs of tax professionals have received surprisingly little attention. The Wall Street Journal's Tax Blog gives “tips and advice for filers,” and Paul Caron’s legendary TaxProf Blog is an excellent clearinghouse for academic and policy-oriented news. Yet, tax practitioners still lack a dedicated resource to call their own. For those intrepid souls, we offer TaxBlawg, a forum of tax talk for tax pros.

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Do High State Taxes Discourage Economic Growth--Background Data

In an article to be published in State Tax Notes' December 6 issue, I argue generally that claims that high state taxes discourage economic development may be flawed because they look at statistics selectively and fall prey to the fallacy that correlation implies causation.  In particular, I consider an article by Arthur Laffer in the Wall Street Journal in October, in which data on personal income per capita do not appear to be consistent with the relevant government-issued data.  The Laffer article argued that the introduction of income taxes by various states over the past fifty years has in all cases led to a decrease of per capita income when compared to the United States average per capita income in the relevant period.

Starting with the data on per capita income by state published by the Bureau of Economic Analysis of the U.S. Department of Commerce, I determined that, in fact, seven of the eleven states that have introduced an income tax have had an increase in their per capita income when compared to the per capita income of the United States as a whole.  Moreover, while, as Laffer argued, gross state product did decrease for each of those states, the data for gross state product per capita can be read to indicate that the introduction of taxes had no significant effect on a state's productivity.

For those of our readers who might enjoy playing around with the data, we have posted the underlying spreadsheets on which my article was based, as well as other spreadsheets that can be used to compare various economic statistics by state.  However, remember, as the article warns, that correlation does not imply causation.

Population and GDP By State

Per Capita Income By State

Per Capita Income by State (Inflation-Adjusted)

Unemployment By State

We will have a link to the article when it is published.

  • Of Counsel


    David Shakow has specialized in federal taxation for over 30 years.  He has been a professor at the University of Pennsylvania Law School since 1982; was Deputy Tax Legislative Counsel in the U.S. Treasury from 1980-1981; and has ...